Opinion: Cap and Trade Ignores History’s Warning

Despite consistently describing the economic situation as being dire, President Barack Obama is rapidly moving forward with policies that have the potential to seriously harm American industry. He has tasked Vice President Biden to promote the cap-and-trade program that the envirolobby has been seeking after for over a decade.

The Vice-President, armed with a new study purporting to claim that cap-and-trade would promote green jobs - via government subsidy - is working to allay fears in industry-heavy states, many of which were instrumental in Obama’s victory. The study, produced by the liberal environmentalist group Environmental Defense Fund (EDF), reveals a large number of companies that could add jobs if cap-and-trade were introduced.

But the question is begged: If green energy is so wonderful, why isn’t the free market jumping at the opportunity? If the program needs the government’s hand to jump-start it, it will need government’s dollars to sustain it. And if those are ever in short supply, it will risk collapse.

A good case study is ethanol. After years of promoting it as an alternative to fossil fuels, the sad truth has emerged over time that the industry is almost entirely dependent upon the government. To make matters worse, ethanol-only gasoline actually ends up being more expensive than petroleum-based gas. And without the government subsidies that support it, it would likely fail. As previously reported, there can be unintended side-effects - in the case of ethanol, government subsidies have contributed to food shortages in certain regions around the world, leading to political and economic destabilization.

But even if the green industry could stand on its own, it won’t start overnight. The corporations in place that would offer green jobs are not nearly large enough to absorb the massive numbers of workers that would be laid off when the new cap-and-trade energy policy takes effect. And new, “green” energy plants will not be able to be built at the same rate at which the old ones will fail.

So what will happen? Bail them out? That would compromise the environmental principles upon which the carbon tax is based. Perhaps they may share the fate of the Lehman Brothers, who were refused help while they watched their fellow investment bankers receive government aid. Energy independence is a positive, strategic goal. Renewable energy is a smart, practical goal. But if government tries to “help” the country decide what is best route to that goal, it will only result in failure. The free market is more than capable of discovering and implementing efficient energy policy - while rejecting energy ideas that have no sound economic or scientific basis. For example, nuclear energy -coupled with fuel reprocessing - is a proven renewable energy resource.

America has many resources, to boot. But, like ethanol, not all of them can be efficiently converted into energy. If the government forces an energy revolution for which the market is not ready, it will end up with multiple failed programs on its hands. And the nation has enough of those.

The perfect example is the state of California. Governor Arnold Schwarzenegger began implementing a cap-and-trade program in 2006, promising that “green” jobs would spring up to replace lost ones. But that didn’t happen. California has been losing jobs for quite some time now to more business-friendly states. Unemployment has increased from just under 5 percent to over 9 percent. This will happen on a national level too, if Mr. Obama gets his way. Unfortunately, it appears that the Obama Administration is trying to force the issue. Even if Mr. Obama tries a government-encouraged, market-based approach (as California did), he will wind up having to bail out the program once it fails. By heavily subsidizing the rise of “green power,” yet another government bureaucracy will be created. But perhaps that was its goal all along-greater government control over the economy and most certainly over energy production. The price will be heavy. Politically, the industrial states may not forgive the man they placed in office in 2008. Economically, millions of Americans will risk losing jobs over a special-interest program. And the energy promised will come at such a high cost that Americans may just pine for those days back in the summer of 2008, when gas was “only” $4 a gallon. But by then, it will be too late.

President Obama needs to take a step back and re-evaluate his energy policy - and his ideological environmentalist policies. The experience with ethanol has clearly shown that government-subsidized energy initiatives are subject to high cost and likely failure. And with the current economic climate, cap-and-trade is the last thing that most ompanies can afford. And despite the loud claims of the envirolobby, America cannot afford it either.

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